Deal to sell frack water renewed

SALEM

August 16, 2014

The city Utilities Commission agreed Thursday to renew a deal to sell water to Chesapeake Operating Inc., this time for a two-year period at the same price of $5 per 1,000 gallons of raw water.

A one-year agreement which took effect March 12, 2013 expired, but had been prepared for renewal.

The company has yet to buy any water from the city, but Utilities Superintendent Don Weingart said a representative called this week about it.

"I expect sometime in the near future that they'll be buying the water," he said.

The commission gave approval for Chairman Bob Hodgson to sign the new contract, which is awaiting a review by city Law Director Brooke Zellers and then needs to go to Chesapeake for the company to sign off.

Weingart said they do a very thorough job and it's his understanding that determining where the water's coming from is one of the steps they have to take before they can do any fracking at a site. They also have to do an environmental study for the site and procure right-of-ways along the water route.

No particular site has been identified for the water, but he said it's likely in the area.

The selling of water for the oil and gas industry had been discussed by city council previously and Mayor John Berlin had been trying to negotiate a deal in 2012 before the commission signed the previous contract last year.

As the purveyors of water, Weingart said it was up to the commission to approve any agreement. The water department negotiated the last agreement and this one, too, he said.

Earlier this month, Berlin announced the city received a $46,700 royalty check from Chesapeake Exploration from the oil and gas rights lease deal made in 2012. The three-year lease agreement with Chesapeake was signed for $3,500 an acre for non-surface rights, a 20 percent royalty on gross proceeds and a three-year renewal option worth another $3,500 per acre. The lease covered 390 acres of city-owned property, all out of the city limits.

The royalty check was related to 28 of the 390 acres, with the money split between debt retirement and the capital improvements fund.